Kevin Warsh’s reserved communication style leaves investors searching for signals in the economic data, increasing uncertainty and market volatility. The upcoming employment report could become the next major catalyst. Let’s examine the outlook and develop a trading plan for the EUR/USD pair.
The article covers the following subjects:
Major Takeaways
- The deal between Oman and Iran is raising doubts.
- Rising oil prices are strengthening the dollar.
- The Fed is more tolerant of a strong labor market.
- Weak employment data can provide an opportunity to buy the EUR/USD.
Daily Fundamental Forecast for Dollar
Instead of making concessions, both sides are putting forward new demands. Iran insists on expelling American and Israeli ships from the Strait of Hormuz and on imposing fees on hostile countries. Mediators doubt that Tehran’s diplomats, authorized to sign an agreement with Washington, will be able to ensure its implementation. The markets, too, share these doubts about the deal’s solidity. Oil prices and Treasury yields are rising, causing EUR/USD quotes to post their worst daily performance in two weeks.
Kevin Warsh’s reluctance to reveal his plans is forcing markets to rely more heavily on data. Meanwhile, the upcoming July employment and inflation reports are driving up volatility in the US dollar. Investors are bracing for a storm.
US Dollar Volatility
Source: Bloomberg.
In the Forex market, many traders expect the EUR/USD to react asymmetrically to US labor market data. The Fed has shown greater tolerance for strong employment figures while responding more decisively to signs of weakness. As a result, a disappointing Nonfarm Payrolls report could trigger a rally in the pair, whereas a stronger-than-expected reading may have only a limited impact on the euro.
The report will also shape expectations for the Fed’s September policy decision. Markets currently assign a 54% probability to a rate hike. If those odds fall below the 50% threshold, the US dollar could come under significant pressure.
However, recent labor market indicators point to continued resilience. According to Challenger, Gray & Christmas, announced layoffs in 2026 are down 41% from a year earlier, while hiring has increased 25%. Initial jobless claims have remained below the psychologically important 200,000 level for three consecutive weeks—the longest such streak since 1969. Meanwhile, labor productivity accelerated from 0.8% to 1.4% in the second quarter, outperforming nearly all Bloomberg forecasts.
US Initial Jobless Claims
Source: Bloomberg.
These indicators suggest a resilient labor market that could continue to fuel inflationary pressures. According to St. Louis Fed President Alberto Musalem, the Fed cannot afford to tolerate inflation above its 2% target in the hope of achieving stronger productivity growth.
At the same time, market optimism over uninterrupted shipping through the Strait of Hormuz may prove short-lived. Iran’s demands remain high, and Brent crude’s return to the $80–90 per barrel range highlights persistent geopolitical risks. While the US dollar is recovering, its next move will largely depend on July’s employment and inflation data.
Daily Trading Plan for EUR/USD
The market expects Nonfarm Payrolls to increase by 80,000. A stronger-than-expected reading would likely push the EUR/USD toward the 1.147 support level, creating a potential selling opportunity. Conversely, weaker employment data could trigger a rally in the pair and give a buy signal.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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